Entrepreneurial activity affected by degree of states' economic freedom

Oct 15, 2008

A new study in the journal Entrepreneurship Theory and Practice examines how entrepreneurial activity and level of employment in U.S. service industries respond to changes in the degree of economic freedom among states. Researchers found that the relationship between entrepreneurial outcomes and economic freedom varies significantly by industry.

Stephan F. Gohmann, Bradley K. Hobbs, and Myra McCrickard used data from economic freedom indexes for each state in the U.S. and from the U.S. Census Bureau to examine the effects of economic freedom on industry growth rates.

Results present the following dichotomy: some service industries exhibit firm and employment growth as economic freedom rises while other service industries grow as economic freedom declines.

For example, business and personal services firms are relatively small, and states with greater economic freedom typically have fewer regulations that lower the costs for smaller firms. Consequently, entrepreneurs are more able to grow these services during times of increased economic freedom.

Conversely, legal services grow in response to decreased economic freedom and heightened government regulation because firms affected by these policies increasingly require legal services. Similarly, health and social services respond to demand generated from government programs and grow as the government's purview broadens.

As such results relate to government policy, the authors conclude that: "Policy makers should consider both the spillover effects of targeted policies as well as the direct effects of changes in economic freedom on entrepreneurial decision making."

Source: Wiley

Explore further: Super Bowl athletes are scientists at work

add to favorites email to friend print save as pdf

Related Stories

Children are not for sale

Dec 08, 2014

"Children are not for sale, that's a social taboo", says the sociologist Christian Tribowski. In his dissertation at the Max Planck Institute for the Study of Societies he is using intercountry adoptions ...

Amnesty feels 'chill' from China Internet meeting

Nov 18, 2014

Rights group Amnesty International on Tuesday described a major Chinese-organised Internet conference as chilling, calling it an attempt to have a greater say in the rules that govern the web.

Making cities more accessible for everyone

Oct 31, 2014

Ron Buliung's interest in urban design initially started with his travels to Europe and India where he saw how different cities dealt with issues such as space, wealth, poverty, street life, congestion and ...

Recommended for you

Super Bowl athletes are scientists at work

Jan 30, 2015

Seattle Seahawks cornerback Richard Sherman gets called a lot of things. He calls himself the greatest cornerback in the NFL (and Seattle fans tend to agree). Sportswriters and some other players call him ...

Sundance doc examines real-life Close Encounter

Jan 29, 2015

Earth authorities are completely unprepared for the arrival of alien visitors and worried humans should ready themselves by watching a groundbreaking documentary, the film's director boasts.

Toward a scientific process freed from systemic bias

Jan 26, 2015

Research on how science works - the science of science - can benefit from studying the digital traces generated during the research process, such as peer-reviewed publications. This type of research is crucial for the future ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.